Aviation Finance

Babacar Niang

EDHEC Business SchoolBBA4 / Master 1, Corporate & Investment Banking

Pilot (Private Pilot's Licence holder)Passionate about capital markets and aviationAvailable January to July 2027

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Debt Capital Markets / Aviation Finance

Aircraft Financing Structure Comparator

Four structures a debt desk actually originates, priced on one comparable basis: the IRR of each one's incremental cash flows against paying cash.

Reference rates and market quotes are live, not placeholders: SOFR (Federal Reserve Bank of New York), €STR (European Central Bank), and AF.PA / EUR-USD via Yahoo Finance.

Inputs

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Engine risk

What the engine-risk adjustment reflects

GTF is Pratt & Whitney's Geared Turbofan, the engine on much of the A320neo family, the A220 and the Embraer E2. In 2023 a powder-metal defect was disclosed: contamination in high-pressure turbine and compressor discs can seed micro-cracks and cut their safe life.

The removal campaign runs into 2026. Several hundred aircraft have been grounded at a time, shop visits stretch past 250 days, and the manufacturer has taken multi-billion-dollar charges.

For a financing: lower availability, higher maintenance reserves, a softer resale bid. The adjustment adds a margin premium to the debt structures and a haircut to the sale price and residual in the sale-and-leaseback.

Methodology

Methodology and assumptions

The comparator runs an IRR over each structure's incremental cash flows relative to paying the full delivery price in cash at year 0. That baseline is common to all four, so the implied annual costs are directly comparable even though the structures finance different percentages of the aircraft.

Genuinely live data

SOFR (Federal Reserve Bank of New York), €STR (ECB Data Portal), AF.PA share price and EUR/USD (Yahoo public feed, unofficial, labelled as such). Live SOFR flows into the model when the toggle is on.

Sourced desk assumptions (editable, not live)

  • ECA guarantee fee. OECD ASU-style premium conventions. Default 4.5% of loan, spread over the tenor for the headline figure.
  • SLL base margin and KPI ratchet. Indicative bank margins. Base case assumes the KPI is met (favourable ratchet).
  • SLB lease rate factor. IBA and Cirium monthly ranges. Flat annuity, whereas a real deal steps down.
  • Engine-risk margin add-on and value haircut. Derived from the GTF powder-metal disclosures. See docs/methodology.md.

Deliberately not modelled

Real-time airline credit spreads, actual bank cost of funds, actual ECA fee schedules and live margin quotes are not public data. The tool models the mechanics correctly with clearly sourced illustrative assumptions rather than manufacture false precision.